Regulators Challenge Solidigm's Nasdaq IPO, Fueling SK hynix Shareholder Backlash

Solidigm’s U.S. facility. (Photo courtesy of Solidigm Newsroom) South Korea's financial regulators have said that SK hynix's plan to list its U.S. subsidiary Solidigm on the Nasdaq raises concerns over duplicate listing rules. The remarks mark the first time a senior financial regulator has publicly identified potential duplicate-listing concerns involving a foreign subsidiary seeking a direct listing on an overseas exchange, with implications for how South Korean companies approach overseas listings of their subsidiaries. Lee Chan-jin, governor of the Financial Supervisory Service, said at a parliamentary audit by the National Assembly's Political Affairs Committee on Oct. 19 that the Financial Services Commission and the FSS both viewed Solidigm's proposed listing as potentially conflicting with duplicate-listing rules. Regulators are reviewing whether Solidigm would be required to file a securities registration statement in South Korea and plan to convey their concerns to SK hynix through appropriate channels. According to investment banking sources and foreign media reports, Solidigm has selected Goldman Sachs and Morgan Stanley as lead underwriters and is preparing for a potential U.S. listing next year. Market estimates put its valuation at up to $150 billion, or approximately 200 trillion won, while the proposed offering is reportedly expected to raise $10 billion to $15 billion. Solidigm has also stepped up preparations by hiring a government affairs specialist formerly with Qualcomm and engaging local lobbying firms. The main issue is corporate governance. A Solidigm listing would add another publicly traded entity to an ownership chain extending from SK Group Chairman Chey Tae-won through SK Inc., SK Square, SK hynix and AI Company to Solidigm. The Korea Corporate Governance Forum has described the structure as an unprecedented five-tier case of duplicate listing and urged the board to halt the plan. Critics warn that separately listing Solidigm's enterprise solid-state drive business, or eSSD, could lead investors to discount SK hynix's valuation, creating a so-called double-counting problem. Political opposition has also grown. Rep. Ahn Cheol-soo of the opposition People Power Party said the National Pension Service, SK hynix's second-largest shareholder, should publicly declare its intention to vote against the Solidigm listing. Rep. Kim Hyun-jung of the ruling Democratic Party of Korea warned that the case could set a precedent for other conglomerates and deepen the Korea discount. SK hynix shares have also come under pressure, falling more than 30% in October. Others argue that the listing could be a practical way to secure funding for major investments. Solidigm is considering building a NAND flash memory production facility in New York state. Supporters of the plan say proceeds from a U.S. listing could help fund the project, reduce reliance on production facilities in China and mitigate geopolitical risks. Kim Yeong-geon, an analyst at Mirae Asset Securities, said the move should be viewed not as simply spinning off a subsidiary, but as a way to monetize an acquisition and secure capital for further investment. Although South Korean financial regulators cannot directly block a listing on a foreign exchange, scrutiny is expected to focus on whether SK hynix's board fulfills its shareholder-protection obligations under duplicate-listing guidelines introduced in August. The KOSPI Market Listing Rules require parent-company boards to meet five obligations in duplicate-listing cases, including assessing the impact on shareholders and establishing protection measures. The effectiveness of the rules remains in question, however, given that the maximum penalty for violations is reportedly capped at 2 billion won. Attention is now turning to SK hynix's third-quarter earnings announcement, scheduled for Oct. 28. The company has said it is reviewing various options to strengthen its business competitiveness but that no decision has been finalized. It has also reiterated that long-term corporate and shareholder value will be its top priorities. Whether the company offers a fuller explanation of the Solidigm listing plan or announces additional shareholder-return measures alongside its earnings could influence the stock's next move. 비지니스코리아 businesskorea (Businesskorea)